Portfolio optimization through hybrid deep learning and genetic algorithms vine Copula-GARCH-EVT-CVaR model

Khaled GUESMI, Rihab Bedoui, Ramzi BENKRAIEM, Islem KEDIDI

This study investigates the potential benefits of using the Conditional Value at Risk (CVaR) portfolio optimization
approach with a GARCH model, Extreme Value Theory (EVT), and Vine Copula to obtain the optimal allocation
decision for a portfolio consisting of Bitcoin, gold, oil, and stock indices. First, we fit a suitable GARCH model to
the return series for each asset, followed by employing the Generalized Pareto Distribution (GPD) to model the
innovation tails. Next, we construct a Vine Copula-GARCH-EVT model to capture the interdependence structure
between the assets. To refine risk assessment, we combine our model with a Monte Carlo simulation and Mean-
CVaR model to optimize the portfolio. In addition, we utilize a novel version of deep machine learning’s genetic
algorithm to address the optimization decision. This research contributes new evidence to the CVaR portfolio
optimization approach and provides insights for portfolio managers seeking to optimize multi-asset portfolios

Publication type: 
Scientific Article
Date de parution: 
Technological Forecasting and Social Change